'Investing is for the rich': Finance expert debunks this one expensive myth

Nearly 4 in 10 Americans are missing out on a major way to build wealth because of an expensive myth: They think investing requires thousands of dollars just to get started. Meanwhile, their money languishes in an account earning 0.38% APY — or nothing at all at big banks like Chase, Bank of America or Wells Fargo — all while inflation quietly eats away at the buying power of their dollars.

The truth? You can start investing today with whatever you’ve got in your pocket. The days of needing serious money to join the rich person’s investing club are over, thanks to modern investing platforms.

The damaging ‘investing is for the rich’ myth

Personal finance educator Thomas Maluck calls this single misconception one of the most damaging pieces of bad advice people follow.

“There is a common misconception that investing is only for rich people, either because financial institutions will refuse service to people in one’s income bracket or because of a perceived fee for entry,” Maluck says. But what most people don’t realize is that “the most popular retail brokerages offer no-fee, fractional share trading for as low as $1. In other words, anyone can invest these days,” he adds.

It’s a myth that used to be true, which is why it’s stuck around. Old-school investment firms once required minimums of $3,000 or more just to invest in mutual funds. Buying individual stocks required full shares costing hundreds of dollars for companies like Apple or Google. To diversify across multiple stocks, you needed thousands just to buy a single share.

Cue best of technology. Fractional shares mean you can now buy into any stock with pocket change. Want Apple with only $50? You can grab a quarter share and still cash in on this tech giant’s success.

Learn more: Common investing myths that keep people from building wealth

Why starting small beats waiting for “enough” money

If you wait until you’ve saved thousands, you might never start investing at all. Life has a way of throwing curveballs — unexpected bills, education expenses, TK — just when you think you’ve saved enough.

You can make investing a habit with as little as $100 while learning how markets work and developing the emotional discipline through the ups and downs. Plus, with dollar-cost averaging, you can invest the same amount more regularly, no matter what the market’s doing.

Say you’re looking to invest $100 each month. Here’s what you might expect, assuming a conservative 8% average annual return.

Pay close attention to that last line: Investing just $100 a month — a little over $3 a day — turns your $36,000 contributions into a six-figure nest egg over 30 years. You might even find that psychological win pushes you to invest more with every raise, bonus or windfall that comes your way.

Ready to get into the market? 3 easy steps

No need to lace up your sneakers to storm the New York Stock Exchange. You can jump into the market in three key steps.

1. Pick a platform

Today’s modern investment platforms charge low fees for beginner-friendly dashboards that make it a breeze to manage your money, including:

• SoFi Invest. This major platform offers automated investing or self-directed options with free help from financial advisors when you need it.

• Robinhood. This popular app pioneered commission-free trading with a super simple mobile experience. Choose from self-directed investing or professionally managed portfolios.

• Acorns. This robo-advisor builds a custom portfolio for you, helping it to grow through rounding up your everyday purchases and investing the spare change.

2. Open an account

With your Social Security number, employment info and other basic details, you can sign up in under 15 minutes right from your phone, tablet or computer. Most platforms verify your identity instantly, though some may take up to a day.

3. Link your bank account and set up automation

All that’s left is connecting your checking or savings account to fund your new investment account and setting up regular transfers — even $25 weekly adds up over time.

What can you invest in?

No need to overthink your first investment. Take it from the Oracle of Omaha himself.

Warren Buffett repeatedly recommends simple broad market funds as the best place to start.

Think of these funds as giant baskets holding hundreds or thousands of different companies to invest in. Even a share of these funds means you’re investing in every company it contains.

Putting your money in the S&P 500 fund buys you a tiny slice of Apple, Microsoft, Amazon, Google, Tesla and another 495 of the largest companies in the U.S. When Apple has a stellar quarter, you win. If one company struggles, the other 499 help cushion the blow.

3 popular low-fee funds for U.S. and global markets

You’ve got the pick of hundreds of excellent funds covering a range of markets. Each of these three funds unlocks broader access than the last, starting with domestic giants, then the entire U.S. market and finally, the whole world.

• Vanguard S&P 500 ETF (VOO). Gives you access to 500 of the largest U.S. companies with a low 0.03% annual management fee — you pay $3 a year for every $1,000 you invest.

• Fidelity Zero Total Market Fund (FZROX). Covers the entire U.S. stock market with 0% management fees. (Yes, zero.) Fidelity uses this fund to draw in new customers, relying on the money it makes elsewhere to bridge the gap.

• Vanguard Total World Stock ETF (VT). Unlocks exposure to more than 9,000 developed and fast-growing companies all over the world — from Japanese tech firms to European banks and emerging market manufacturers.

Learn more: What are mutual funds? And how they work

5 biggest traps you should avoid

With years of teaching people about money behind him, Thomas Maluck flags mistakes he’s seen people make over and over — and that you can heed when jumping in:

• Don’t assume you can beat the market. “People can shift dangerously fast from acknowledging the stock market is full of large, dangerous players to thinking they alone have the expertise to somehow beat everyone else,” Maluck says.

• Don’t try to spot patterns in market movements. Stock prices bounce around for many different reasons, making it difficult to time the market. “Dividends, earnings reports, day traders and many more factors influence the price,” Maluck says.”Looking for distinct patterns in a jagged line is a fool’s errand.”

• Don’t let FOMO drive your decisions. “Fear of missing out drives a lot of the worst investment decisions,” Maluck warns. “If someone takes a large risk and it pays off, so much the worse, because people will convince themselves they can win one more payday. That’s a casino mindset, and the house always wins.”

• Don’t think the market is rigged against you. Maluck recognizes “the retail investor is outnumbered, outgunned and lacks a lot of crucial information,” adding, “the situation isn’t hopeless as anyone can use low-cost, diversified funds to secure the market average.”

• Don’t react to every headline. “Investors would love to believe they have the reflexes and savvy to respond to headlines and perceived trends to swerve with the times,” he says. You need to stay patient: “It pays to zoom out and remember why you chose the strategy you did.”

Learn more: Useless investing advice that experts warn against

More stories about investing and growing your wealth

📩 Have thoughts or comments about this story — or ideas on topics you’d like us to cover? Reach out to our team.